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Wednesday, June 23, 2010

Microvision: Pico Projector Consumer is Well and Alive

Economists and investors cheered the 2nd Qtr 2010 earnings results from Apple Inc. (AAPL), saying it was a sign that the global consumer is alive and well. The company sold a mind boggling 2.94 million Mac PCs, 10.89 million iPods, and close to 8.75 million iPhones in a three-month time span. And these numbers do not include the 3 million iPads sold since April.

First, here’re the Apple numbers for the 2nd Qtr 2010…

• Total sales: $13.5 billion, up 48.6% year over year
• Earnings: $3.33 per share. up 86%
• Profit: $3.07 billion, up 89.5%
• Mac sales: 2.94 million units, up 33%
• iPhone sales: 8.75 million units, up 131%
• iPod sales: 10.89 million units, down 1%
• iPod touch sales: up 66%; iPod revenue up 12%
• Apple store visitors: 47 million in 286 retail outlets, up 20%
• Gross margin: 41.7%, up from 39.9% last year
• Cash and marketable securities: $41.7 billion, up $1.9 billion since December
• Guidance for the third fiscal quarter: revenue between $13 and $13.4 billion, EPS between $2.28 and $2.39, gross margin 36%

Wow, that doesn’t sound like a recession. But is that really good news or is there something unnerving about all that spending in this harsh recession that we should be concerned about?

Could it be that people spent money in a haphazard manner? Or they spent money [just to keep-up with the Jones] when they really should have been saving?

Either way, I expect the laser based PicoP Projector to follow the same buying pattern as the iPods, iPhones, and iPads.

[Note: Just to be sure we are on the same page; let me qualify that statement with a caveat… it’s the first second half of 2011 that I’m talking about; when the green lasers have become plentiful and their price has come down significantly from the current levels.]

Here’s a story [that I read somewhere] to explain why…

“In the 1970s, Harlem was one of the poorest neighborhoods in the nation, but it was a money making machine for people selling expensive clothes, sneakers, and cars. Before it opened, there was much concern that a McDonald’s in the hood would be an abject failure.

As it turns out, the first McDonald’s in Harlem became the number one selling restaurant for the chain in the entire world for years. Back then, there were street vendors who lived in the community and the money they made circulated among the people that earned it. However, for the most part it was like there was a giant vacuum cleaning hose sucking up all disposable, and not-so-disposable, money out of the hood.

Nothing was more peculiar than the need to own “Air Jordan” sneakers. Mothers that scrubbed floors for minimum wage had to drop $200 to make sure their children fit-in and were part of the hip crowd. Households that sustained themselves on welfare checks also felt the same pressure. Demand for these overpriced shoes never waned even after waves of violence, even murder, was being committed to own them. It was the ultimate status symbol, one that made you cool and one that also made you a potential candidate for the morgue. It was American consumerism at its best. It brought out what John Maynard Keynes called “animal spirits.” The desire to own these ultra expensive sneakers also brought out what sociologists might also brand “animal spirits”, too.

After fueling the growth of the world for decades, it is clear that the American consumer is now struggling. One lesson we’ve all learned over the years is that prosperity can be fleeting. In fact, in a blink of an eye it seems like all of our wealth vanished and somehow landed in China. It’s such a fascinating reversal of fortunes, but it underscores the notion of fiscal prudence. Those “Air Jordan” sneakers that were all the rage in Harlem were made by peasants in China whose annual income was so small they couldn’t afford to live [in Harlem] for one week. China isn’t the financial juggernaut it is because there are 1.3 billion people there; the cheap labor source of the world belies the notion of becoming wealthy. Their secret was saving. Saving money for years, living on the bare minimum, fixated on the future.

With that in mind, iPods, iPhones, and iPads are today’s “Air Jordan” sneakers… hip, stylish, and must have gadgets… but not a necessity.

Stuff We (don’t) Need but Must Have:

Ironically, the Pew Research Center released its latest survey on things that the public believes are necessities. The results are somewhat shocking. There were huge percentage decreases for clothes dryers, home air conditioning (maybe it will be higher in July than April), television sets, and microwaves. In fact, there were only a few items listed that more people believe are necessities now versus 2006. High speed internet access increased 2%, but only 31% said it was a necessity. Flat screen televisions increased the most, up 3%. Then, there were those iPods, again, increasing 1% to 4%. Like many surveys, much could be made of the results. On one hand, it could suggest less materialism.

But this list isn’t about chasing the Jones; rather it’s about basic stuff that is within reach of most Americans… like iPods, iPhones, and iPads. There is no doubt that income, or lack thereof, played a major role as respondents are certainly feeling the pinch. A whopping 57% said that they’ve bought less expensive brands or shopped more at discount stores… this is evident in the moves of stocks such as Family Dollar Store, 99 Cents Only Stores, and CitiTrends. Perhaps a silver lining is the 28% that said they’ve cut back on alcohol and cigarettes.

There are so many other things people are doing to adjust to their current circumstances. The sharp decline in what people think they need, however, is remarkable. Maybe there is something else afoot in this story.

Still, there is another way to look at the results. In some ways I believe that people may be taking many things for granted… things like iPods, iPhones, and iPads. I kind of lean that way, and it’s not just that we think an air conditioner is less important but some people think we don’t need more ships and jet fighters to protect us. Heck, this weekend we fired up the air conditioners in our house. If asked a week earlier I may have been inclined to say air conditioning wasn’t a necessity, but after a two hour bike ride in the blazing sun I felt like a walking volcano and at that moment the ice cube maker and AC were right up there with Guttenberg’s printing press as the greatest inventions ever.

One of the side effects of a horrific economic slide is a sense of defeat as well. However, we can’t be so down in the dumps as to become vulnerable to so many things, including the shifting away from the things that made the nation great in the first place… our innovation and the high tech industry to fuel the future prosperity.”

Yes, I do expect to see the global consumers buying millions upon millions of more iPods, iPhones, iPads… and of course, the PicoP projectors.

The next popular product categories that integrate PicoP projectors would be fixed and mobile computing devices, and a whole range of multi-functional consumer electronic products such as smartphones, digital photo frames, personal media players, digital cameras, and digital camcorders.

“As mobile devices add more multimedia capabilities, embedded picoprojectors can add a big-screen experience to a very small device,” said David Chamberlain, Author of the report and Principal Analyst, Cellular Devices, Mobile Consumer and Mobile Video Services, In-Stat.

In-Stat found that illumination technologies are rapidly and continuously evolving by the day with manufacturers able to produce and supply Light Emitting Diodes (LED’s) and green lasers, and that the demand for such gizmos integrated within other devices will be so huge that the volumes will easily drive down modular costs to the extent that pico projectors will become part and parcel of billions of relatively low cost cell phones and media players.

The future for pico projectors is guaranteed since there is evidence of consumers willing to pay more for additional technologies such as good quality cameras, reported TMCnet, to be included in a single hand held mobile device.

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